Mavluda Hassanova rattles around in her ice-cold shop. With each passing winter, she becomes more depressed as she sits amid empty shelves in a decaying building that was once her pride and joy.
A recent World Bank analysis on small business failure in the Central Asian republics comes as no surprise to her. She understands corruption and extortion first-hand, as do many of her friends, who are also entrepreneurs struggling to find business success in post-Soviet Uzbekistan. [For background on the economic climate in Uzbekistan see Eurasia Insight] News that former Soviet republics could double per capita income by cutting corruption and enforcing the rule of law, holds no joy for Mavluda, and those like her, who are daily victims of an arbitrary legal system.
Mavluda's story is one of hard work. She rose from floor sweeper to become the manager of her local grocery shop. She was proud of her achievements and excited when independence gave her the chance to be her own boss. But things haven't worked out quite as she had hoped. Mavluda is now earning 10 cents a day in profit, and finds herself desperate to get out of the grocery business.
Independence for Uzbekistan has been a time of economic tumult a period in which the ruling elite has profited, while others have flailed. Mavluda was optimistic in 1994, when she found out that shops such as hers were up for sale. The Soviet dream -- a shop on every street corner providing basic necessities such as oil, flour, sugar and bread -- had been hers too. The fact that the initial sell-off was compulsory did not trouble her unduly at first because she was convinced that the best interests of the people were being served.
Very soon, however, she realized that she had been trapped in a tangle of presidential decress and complicated legislation. She explains that she came to dread the myriad sanitary inspectors whose "charges" for giving her shop a passing grade would be a crate of vodka, or a sack of flour. The taxmen would visit twice a week, more often if there was a sugar shortage, and take bribes in exchange for not falsifying her figures. She also had to pay off the employment inspectorate which regularly checked her compliance with staffing regulations. Compounding her burden was the fact that a local official's son owned a shop down the road. His privileged status granted him an effective tax exemption, and thereby doubled the bribe burden on Mavluda, since her shop was the only other one on the street.
On top of the bribery, there was a thicket of burdensome rules. There were rules for where she could buy produce. There were rules for what she could sell and for how much. There were rules for summer and rules for winter, as well as regulations on how much she could pay yourself and your staff. She also had to deal with significant increases in business heating and lighting bills and demands for exterior renovation when, as happened to Mavluda, her shop was deemed to be within glimpsing distance of the presidential cavalcade as it swept from the airport. In addition, there were draconian banking regulations which meant that money deposited was subsequently unavailable for withdrawal.
The burden of running her so-called private business became unbearable, and she concluded that honest trade was a non-starter. World Bank officials have estimated that local officials typically extort one third of the annual profits of small private companies. This is wide of the mark, says Mavluda, who reckons that at least 90 percent of her profits are devoured by bribe takers.
"The problem," as her friend Farida, a struggling independent tour operator sees it, "is that we are not left alone to run our own business."
Farida adds that entrepreneurial activity in Uzbekistan is punished, rather than encouraged. "It is impossible to be honest," she says. "Either they don't trust us or they are blind to what those who carry out their orders are doing to us.
Jennifer Balfour is a freelance writer based in Central Asia.